Continuing its free fall against the dollar,the rupee on Thursday declined further to 54.60 intra-day as euro zone crisis and the countrys deficit worries persisted. However,intervention by the Reserve Bank of India (RBI) cushioned against a steeper fall and the domestic unit closed at 54.47 against the US dollar.
With global risk assets remaining under pressure,the mood remained grim given the political uncertainty in Greece and the challenges at home,forcing the RBI to intervene again. A positive close in Indian stocks and fresh dollar selling by exporters at higher levels also helped the rupee to remain somewhat stable near its overnight close of 54.49,dealers said.
On Wednesday,the central bank had intervened in the morning but was then seen largely in the sidelines as the rupee broke below the previous record low hit in December,but that changed on Thursday after the currency again hit an all-time low.
Fund manager of Quantum Asset Management,Arvind Chari,said,The Indian rupee is struggling on the back of global negative sentiment and continued pressure on the current account with capital flows just not matching up to import and portfolio outflows. Although we believe that the RBI has lot more up its sleeve to protect the currency,the communication from policy makers in this regard continues to remain poor,thus impacting the sentiment. Policy makers need to realise that global investors most fear an unchartered currency trajectory.
We believe that India should admit that the current phase is tough and challenging but that they are in control of the situation and would respond with appropriate policy responses. We are facing the consequences of a bad growth policy mix of trying to achieve a 9 per cent growth in a weak global economy with domestic supply constraints, he said.
A current account deficit of 4 per cent of GDP,indicating domestic demand and high oil/gold imports has been difficult to fund and has resulted in the rupee depreciating,Chari said.
Stock markets wiped out most of Wednesdays losses intra-day with investor sentiment reconciling to the Greek crisis. After the across-the-board selling on Wednesday,the BSE benchmark Sensex today rose 210 points on strong Asian trends but pared some of the gains to close at 16,070.48,a rise of 40.39 points.